We’re busy analysing our feedback and other data to produce the next Charity Mentors Oxfordshire Impact Report (coming soon!). We’ve already noticed that a common issue that crops up for our Charity Mentors is that of financial resilience. Many charities and voluntary organisations feel their situation is quite the opposite – an almost permanent state of financial precariousness! And even if current funding for your organisation looks reasonable, it takes an act of boldness to take on more costs or more commitments in order to expand the organization and take that next step.

But what do we mean by “financial resilience”? If it means the ability to keep going for some unspecified time into the future, you only have to walk down the high street to see that this is not guaranteed for any organization whether commercial or third-sector, large or small. Small independent restaurants in Oxford pop-up and, often as not, pop-down. And large organisations are as vulnerable as small: Carillion, Toys R Us, and Pound World are just a few of the big names that have disappeared over the last year or so. Personal insolvency was at a 6-year high last year (https://bit.ly/2v18Rbc). No organization is so successful, so powerful or so dominant that it can guarantee it’s existence. Resilience is about building defences against shocks which hit the organisation and force it off its trajectory.

What makes financial resilience even more challenging for many third sector organizations is that they are reliant on relatively few sources of revenue, so if they lose one of them, it can be disastrous. They are not dissimilar to many commercial organizations who rely on one large customer for their revenue. The idea that any organization can guarantee its financial sustainability is a myth. But making your organization less exposed to the risk of financial melt-down is achievable.

What would be top of your list of the things that you require to make your organization more financially resilient and robust? We discussed this at a recent meeting of our Charity Mentors and this was our Mentors’ “top 5”. How does it compare with your own thoughts, and is this where your focus truly lies today?

1) Governance and strategy: The overall responsibility for financial resilience is ultimately with the board but, in reality, it has to be a shared responsibility, so the management team must share in its building and delivery. The important thing is that financial resilience and sustainability should not be abdicated to the CEO/manager or a “fundraiser”. There needs to be financial competency and clarity around the offering/story/strategy.

2) Financial literacy embedded in the organisation: It’s important that everyone understands the numbers and that some key metrics are chosen for closer investigation. It takes more than a cursory examination of the budget at board meetings. How much does it cost your organization just to keep the doors open (core costs)? What are the costs of each separate project/activity? Is there one activity that is being heavily cross-subsidised by others? If the organization had to close, how much would it cost to give your staff the time to look for something else and for beneficiaries to make alternative arrangements (reserves)? Is there a Plan B to manage the risk of anticipated events not turning out the way you had hoped?

3) Real partnerships and strong relationships: Develop and nurture relationships with funders, potential funders and partners. Be proactive. Give feedback. Keep them informed and show them that you can give them a return on their investment in you. Build a partnership where possible and go beyond what you are asked for. Keep them close. They are looking for causes that interest and inspire them. Make your pitch bespoke and think about “why us?”. If you get turned down, consider going back. If you get one-year’s funding, consider asking for 3 (whether it is offered or not).

4) Diverse sources of funding and efficiency in delivery of services: Look for diverse sources of funding if you can but don’t continually reinvent yourself so that you “chase the money”. Partnerships and alliances can be a creative way of sharing financial risk. Think carefully about cost efficiencies in delivering services – be realistic about what you are able to offer. Be bolder in asking people to pay for services, it doesn’t necessarily mean asking beneficiaries to pay although you need to explore all options – think creatively about generating revenue from the services of the charity.

5) Think it through!: And, maybe we would say this, but get yourself a mentor so that you can talk through how you are approaching the challenge of building resilience and managing risk – that you are not missing something important – and that you are focusing scarce resources on what is important and you can do more than survive, but actually thrive, and maybe take the next step!

 

Do get in touch with Charity Mentors if you would like to share your experience or leave feedback:

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Things are changing so fast, an organization needs to be nimble and pick up on opportunities. A strategy can stifle innovation.

We’re a small organization. We rely on a couple of key funders. We’re very focused on what we do and what we provide. We have limited resources and we’d rather use them to deliver what we need to deliver rather than unrealistic “blue sky” strategic thinking. We know what works.

We took weeks to put together our strategy. We involved all our stakeholders, looked at the options, fleshed out a direction of travel and had just finished putting the finishing touches to a business plan that looked at focus, funding and resource use for the next 3-years when we heard that our lease wasn’t going to be renewed, our chair had a heart attack and our biggest funder was going to reduce spend with us by over 50% in the coming contract. So our strategy became irrelevant.

At Charity Mentors we know that many organizations don’t devote the necessary time to strategic thinking, and we think this is partly because they think the time spent is of limited relevance compared to the day-to-day challenge of keeping the show on the road. Or to put it another way, the effort required to keep the show on the road means strategic thinking tends to get squeezed out!

Whilst the quotes above seem to mitigate against the idea of spending time on strategy, this article shows why, in each case, strategy is still relevant, no matter how fast moving the circumstances or how small the organization.

The real value of strategy is in the thinking and discussions it necessitates and the people it brings together. It starts with the “why?” (“Why do we exist as an organization?” For instance, we’re not here to “run a community hall”, we’re here to “bring the local community together so we can help each other, especially the more vulnerable members of our neighbourhood”). And moves to the question of “where do we want to be in 2-4 years’ time?” If the “why” is compelling, the answer won’t be “the same place as now”, however big or small the organization! It might not be about being “bigger,” it could be about being better or doing things differently: ensuring focus whilst grasping an opportunity and/or navigating some major challenges.

A good strategy goes on to identify the various options and the two or three most important challenge(s) that an organization faces [and a challenge can be an opportunity or a threat!] and provides an approach to overcoming/exploiting them. Strategy involves focus and therefore choice. There will be options but it’s as much about what we are not going to do as what we are going to do.

This means that a long list of “things to do” is not a strategy. Often when a group of stakeholders get together, they all suggest things they would like to see accomplished. Rather than focus on a few important items that would address the challenges that have been identified, the group sweeps all the different suggestions into a strategic plan. But this is a “wish list” not a strategy.

The Strategy Process

There is no substitute for a good strategy. Developed and “owned” collectively by trustees and managers, and reviewed regularly, it provides an agreed pathway that guides board thinking and decisions. Equally important, it provides clarity, direction of travel and (critically) job content for the CEO, whose day-to-day role is thus aligned to the purpose and direction of the organization.

Small organizations need to think about their purpose, direction and future challenges that will require focus and resources, just as much as larger organizations. If the chair has a heart attack or the lease doesn’t get renewed (as in the earlier quotation), this doesn’t necessarily mean a strategy has become irrelevant. The “why?” and where you want to be in 2-4 years’ time probably won’t have changed. It might mean changing day-to-day priorities but the purpose and direction of travel remains focused as it is on delivering a service that meets the needs of the people whose lives we are helping.

Summary:

  • The essence of strategy is to answer the questions. “WHAT IS OUR PURPOSE AND HOW DO WE PROPOSE TO DEVELOP IT IN THE COMING YEARS?”
  • That requires a CLEAR AND AGREED FOCUS on our target group, the people we want to help.
  • The BOARD IS RESPONSIBLE for articulating the strategy, which informs and shapes the role of the CEO.
  • The strategy is an AGREED STATEMENT OF PURPOSE, not a wish list.
  • It DEFINES A PATHWAY over a 2 – 4 year period: “WHERE DO WE WANT TO BE?”
  • The strategy DEFINES THE RISKS and mitigating actions that need to be managed.
  • The strategy recognises and evaluates the challenges and MAKES CONSIDERED CHOICES.

Having an outsider to help structure the thinking, challenge ideas and, where necessary, to help channel behaviours in a productive way is often a very good idea. Feel free to contact [email protected] if you would like to discuss using a mentor in this way.

Do get in touch with Charity Mentors if you would like to share your experience or leave feedback:

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Good leadership is important in any organisation, and the relationship between the Chair and the Chief Executive is pivotal to success. When it works well things can fly, but when there are problems life becomes very difficult. This is a particular problem for small organisations as so much is riding on getting this right.

Chief Executives of small charities often don’t have another senior member of staff to turn to and Chairs may not have a sufficient skill base amongst their board to provide sufficient support. When times get tough the pressures can mount and it may then only take something small to trigger a crisis.

At Charity Mentors we find that whatever the presenting problem, mentees often have issues and tensions with this relationship, sometimes because someone is new to the role and lacks experience or understanding of the sector, but also when there are challenges on the horizon that increase the risks or require a different approach.

This made me interested in looking at how people made this relationship work in a practical sense and I used this as the focus for some research as part of my recent MSc. Past studies have tended to look at the components of good relationships or the way the roles are split but there is relatively little about what is actually going on under the surface and I was keen to glean tips from others’ experiences.

I interviewed a range of experienced Chairs and Chief Executives and many themes were common to all, for example the importance of trust, mutual respect and good communication but what was more interesting were some of the things that don’t normally get included in checklists of good practice.

These include the importance of getting to know how the other person ticked and being willing to accommodate them in a climate of mutual respect; finding ways to understand each other’s (often unspoken) expectations before something blows up and, on both sides, really understanding the balancing act that the other is carrying out.

The underlying dependencies on both sides were about trust and the things that get left unsaid. In many senses this goes to the heart of the unwritten psychological contract in any relationship and if there is a mismatch or misunderstanding in this unspoken ‘deal’ then there will be trouble ahead. Working with a mentor can help to unpick some of these issues, and as ever, once things are out in the open they become much easier to deal with.

Top tips for Chairs include:

  • Make sure that you invest time in really understanding the organisation – this may take much longer than you expect
  • Be prepared to flex your role over time
  • Think through your values and assumptions and make these clear early on, and recognise the potential impact of your Chief Executive’s unspoken feelings about the role


Top tips for Chief Executives include:

  • Be prepared for your next Chair to be different to your last one
  • Recognise that your chair is a volunteer and you need to go some way to accommodating him or her too
  • Think through what pressures you are under that aren’t in the job description or those where you think the Board doesn’t understand them and try and make these explicit

Do get in touch with Charity Mentors if you would like to share your experience or leave feedback:

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